Daqo New Energy Reports Strong Quarter In Q3/2022

• Daqo New Energy's Q3/2022 polysilicon production capacity was 33,401 MT above its name plate capacity
• It sold 33,126 MT for $36.44 per kg ASP which was an increase of 14% sequentially
• Gross margin went up to 80.2% and gross profit to $946.9 million thanks to lower production costs and higher ASPs
• The company expects to produce 30,000 MT to 32,000 MT polysilicon in Q4/2022 and for full year the forecast is for 130,000 MT to 132,000 MT production

Chinese polysilicon supplier to the global solar PV industry Daqo New Energy reported a robust quarter in Q3/2022 with gross profit of $946.9 million as average selling price (ASP) for 33,126 metric ton (MT) polysilicon it sold rose to $36.44 per kg, up 14% from $33.08 per kg in the previous quarter.

Daqo produced 33,401 MT during the reporting quarter while carrying out scheduled annual maintenance which is above its name plate capacity. "Driven by the rising global energy prices and the urgency to address climate change, both demand and pricing for solar PV products increased during the quarter, with particularly strong demand from markets such as China, Europe, Southeast Asia, and Brazil," said Daqo CEO Longgen Zhang.

Its annual name plate polysilicon production capacity at the end of Q3/2022 was 105,000 MT.

Its production of mono-grade polysilicon reached 99.9% in September 2022. For the coming year, it targets ultra-high purity n-type polysilicon to become the company's fastest growing product segment.

Average total production cost of polysilicon for Daqo dropped down to $6.82 per kg from $7.26 per kg in Q2/2022 but up from $5.82 per kg in Q3/2021.

Its revenues of $1.219 billion came down from $1.244 billion in the previous quarter due to decrease in sales volume, mitigated by an increase in the ASP. Gross margin improved to 80.2% as compared to 76.1% QoQ thanks to lower production costs and higher ASPs. EBITDA on non-GAAP basis was reported to be $720 million, down from $955.4 million sequentially.

Net income for the manufacturer declined to $323.4 million from $627.8 million sequentially.

According to Roth Capital, both EBITDA and EPS were below consensus and ROTH estimates. However, "These misses were primarily due to ~$260mn of share based compensation that had been announced in August as part of the 2022 share incentive plan," according to Roth analysts.

Guidance

"The fourth quarter is typically a busy season for China's solar PV market," explained Zhang. "Current polysilicon ASPs remain high at approximately $36-38/kg (VAT excluded) and the inventory of polysilicon is low across the value chain. We expect that module prices will be well supported in the range of RMB 1.85-1.95/watt, which will provide a very strong support for polysilicon ASPs."

During Q4/2022, Daqo aims to produce approximately 30,000 MT to 32,000 MT polysilicon. The management has offered a revised guidance for 2022, now aiming to roll out between 130,000 MT to 132,000 MT—inclusive of its annual facility maintenance. Previously, it guided for annual production volume of between 129,000 MT to 132,000 MT (see Daqo New Energy's Q2/2022 Financial Results).